Under ordinary circumstances, the concept of gold stocks to buy carried significant risks. Typically tied to mining firms, the sector is notorious for its volatility and choppiness. When conditions favor hard assets, they tend to rise sharply higher. But without the benefit of the fear trade, the sector often drags due to multiple disadvantages.
Again, the unpredictable nature of gold stocks tends to keep investors on the sidelines. Additionally, gold doesn’t attract buyers in the way that it may have for prior generations. Yes, precious metals do have industrial uses. But at the end of the day, they’re commodities. They don’t generate earnings, nor do they pay dividends. So the rough spells in between bullish cycles can easily frustrate participants.
However, with the combination of the novel coronavirus pandemic and the Russian invasion of Ukraine, gold stocks to buy may represent one of the better ideas to consider in 2022 — and perhaps beyond. It’s not just about these two negative catalysts, but their associated responses. Deteriorating geopolitical relations and the imposition of sanctions create an interesting environment for the global economy, cynically boosting precious metals.
Even before the outbreak of hostilities in eastern Europe, soaring inflation was a massive problem affecting consumer sentiment. Now, with fuel prices skyrocketing to ridiculous levels, the cost of goods that need to be shipped from one place to another — basically everything — will likely rise too. Logically, this narrative increases the relevance of gold stocks to buy.
Just as problematic, investors seemingly have every reason to believe that the end of the current market uncertainty won’t be any time soon. Thus, due to this dangerous iteration of the sunk-cost fallacy, the below gold stocks to buy are worth serious thought.
- Newmont Corporation (NYSE:NEM)
- Barrick Gold (NYSE:GOLD)
- Gold Fields (NYSE:GFI)
- Franco-Nevada (NYSE:FNV)
- Wheaton Precious Metals (NYSE:WPM)
- Osisko Gold Royalties (NYSE:OR)
- DRDGold (NYSE:DRD)
- Seabridge Gold (NYSE:SA)
- Galiano Gold (NYSEAMERICAN:GAU)
Though gold stocks appear to be a no-brainer idea, it’s possible that costs could rise so much that it forces the Federal Reserve to take drastic action, thus leading to a recessionary environment. Furthermore, you need to conduct your own due diligence. While I like the idea of gold as a protective hedge, as a participant myself, you’ll want to make a decision based on your comfort level.
Gold Stocks to Buy: Newmont Corporation (NEM)
While betting on under-the-radar gold stocks sounds like an appealing idea, the sector can be incredibly wild. Therefore, it makes sense to spread your risk with a mixture of ideas; From the most reliable entities to the speculative fare. That said, Newmont Corporation is on the top end of the spectrum, being the world’s largest gold mining company.
Because of this lofty status, you shouldn’t expect to get rich off Newmont shares. Still, precious metals have become very intriguing due to outside circumstances. On a year-to-date (YTD) basis, NEM is up 18% — demonstrating strong investor sentiment.
In 2021, the company generated revenue of $12.2 billion, up over 6% from the prior year’s tally. Also, net income last year amounted to $1.17 billion, a solid performance after a few years in the pre-pandemic era of net losses.
As well, Newmont features a dividend yield of 2.9%, an attractive proposition amid rising inflation.
Barrick Gold (GOLD)
As another name among high-powered gold stocks to buy, Barrick Gold is one of the biggest companies in its industry. Featuring “mining operations and projects in 13 countries in North and South America, Africa, Papua New Guinea and Saudi Arabia” per its website, Barrick has a wide footprint that should help insulate the business from potential headwinds.
Beyond its gold-mining endeavors, Barrick is also a significant player in the copper arena. Long a critical metal to various industries, copper will become even more relevant due to countries seeking alternatives to fossil fuels. As noted by Reuters, the commodity plays a significant role in the electric vehicle (EV) rollout.
In 2021, Barrick generated revenue of just under $12 billion according to preliminary reports. This tally comes in about 5% below 2020’s result of $12.6 billion. Nevertheless, Barrick managed to deliver net income of $2 billion last year. And on a YTD basis, GOLD stock is up nearly 27%.
Gold Stocks to Buy: Gold Fields (GFI)
Headquartered in Johannesburg, South Africa, Gold Fields is among the top names for gold stocks to buy. According to its website, Gold Fields has a total attributable annual gold-equivalent production of 2.2 million ounces (Moz), attributable gold-equivalent mineral reserves of 52.1 Moz and mineral resources of 116 Moz.
In addition, the company features a diverse footprint, with operations in the Americas, Australia, South Africa, West Africa and the Netherlands. Thus, based on where its operation exposure is, GFI also presents an interesting case for geopolitical insulation.
In 2021, Gold Fields generated revenue of nearly $4.2 billion, up almost 8% from the year-ago tally of $3.9 billion. As well, the company posted net income of $789 million last year, up 9% on a year-over-year (YOY) basis.
Based in Toronto, Canada, Franco-Nevada is one of the most popular gold stocks available for public purchase. However, what separates FNV from direct mining endeavors is that it’s a gold-focused royalty and streaming company with a diversified portfolio of cash-flow producing assets.
Rather than taking the risks of extracting precious metals from the earth, Franco-Nevada instead enters into contracts with gold miners. In exchange for an upfront cash disbursement, FNV receives either a right to a percentage of gold production or revenue. This arrangement benefits miners that need capital to support their endeavors while FNV receives gold at discount or an agreed-to share of sales.
For the investor, the benefit is a level of predictability. With direct mining, you never truly know what you’re going to get. With royalty and streaming contracts, the terms are laid out.
In 2021, Franco-Nevada posted revenue of $1.3 billion, up over 27% from 2020’s result. Also last year, it generated net income of $734 million, more than double 2020’s haul of $326 million.
Gold Stocks to Buy: Wheaton Precious Metals (WPM)
As one of the favorites among fans of gold stocks to buy, Wheaton Precious Metals is likely to garner eyeballs for the same reason above with Franco-Nevada; namely, revenue predictability. As a streaming specialist, Wheaton doesn’t directly engage with mining operations. Instead, it receives gold at an agreed-upon discount. In exchange, Wheaton provides upfront capital for mining companies.
Streaming and royalty businesses are very similar to each other. Mainly, the difference between the two is that the former tends to receive production at a discounted price while the latter receives a pre-contracted share of sales generated. Either way, the contractual aspect of the business takes away some of the volatility associated with traditional gold stocks.
Still, what investors must be aware is that with Wheaton or Franco-Nevada, upside could also be limited with streaming/royalty firms due to the contractual nature of their businesses. Still, that might be a worthwhile tradeoff. Wheaton generated sales of $1.2 billion during 2021, which is the highest annual tally since at least 2007.
Osisko Gold Royalties (OR)
Usually, royalty and streaming based gold stocks are among the more reliable entities in the precious metals business. Not only do the issuing companies provide revenue predictability, they also enjoy a history of stable financials. As mentioned earlier, though, the tradeoff is that such investments tend to be less exciting during bullish phases.
Well, if you want to add some spice to your portfolio of gold stocks, you may want to consider Osisko Gold Royalties. Specializing in both royalty and streaming business models, Osisko commands an enviable portfolio of over 130 royalties, streams and offtake assets. As well, its focus in the North America market provides excellent insulation from geopolitical rumblings.
But like anything, the tradeoff here is that Osisko isn’t the most financially stable outfit. In 2021, it generated revenue of nearly $225 million, up 5% from the year-ago tally. However, the company posted a net loss of $23.6 million, which presents risks. For now, investors are taking things in stride, with OR stock up 16% YTD.
Gold Stocks to Buy: DRDGold (DRD)
While gold stocks make for an intriguing investment during periods of tremendous uncertainty, they’re also vehicles for speculation. And folks, I’m just going to keep it real here — many of you read articles like this to find some intriguing ideas with, in exchange for serious risk, offer ample upside opportunity. With that in mind, these next three ideas are quite “adventurous,” beginning with DRDGold.
Another gold producer from resource-rich South Africa, DRDGold is distinct in that it also specializes in the recovery of the yellow metal from the retreatment of surface tailings. Further, the company claims on its website that it has “both the skillset and the systems that enable us to do this profitably and sustainably.”
It’s backing up these claims with strong numbers. For the fiscal year ended June 30, 2021, DRD generated revenue of almost $379 million, up 55% YOY. As well, net income came in at $103.5 million, blowing away FY 2020’s result of $37.1 million.
Seabridge Gold (SA)
Headquartered in Toronto, Canada, Seabridge Gold is pursuing the development of the Kerr Sulphurets Mitchell gold-silver-molybdenum-copper mine in northwest British Columbia. On the surface, SA is attractive because of its geopolitical profile. While you should never say never, it’s safe to say the Canadians aren’t in a hurry to point their warheads at us.
But on the other side of the equation, Seabridge focuses on the resource development aspect of the gold-mining business. It’s had successes in the past to be sure, but gold stocks are historically volatile for a reason. You just never know what challenges might come up.
Furthermore, Seabridge’s financials do expose the business to greater scrutiny, especially considering that other gold stocks are tied to companies with stronger fiscal data. But if you’re looking for a home run and are willing to not bat for average, SA stock could fit the bill.
Gold Stocks to Buy: Galiano Gold (GAU)
I’m not going to beat around the bush: Galiano Gold is the riskiest idea on this list of gold stocks to buy. Really, you should focus more of your research on numbers one through eight. However, if you have some under-the-sofa change that for whatever reason you feel compelled to spend, you may want to give Galiano a look.
A precious metals producer focused on development and exploration, Galiano is what you would call an aspirational play among gold stocks. When people consider the stereotype of mining as an investment, they’re probably thinking about something like GAU. If you hit it big, nothing is more satisfying. But the chances of hitting it big — or even generating a profit for that matter — are low. I’d say extremely low.
So again, please do not mess around with GAU with money you can’t afford to lose. Literal penny stocks are usually that way for a reason. Still, GAU may also be a cheaper alternative to driving or flying out to Las Vegas.
On the date of publication, Josh Enomoto held a LONG position in gold bullion. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
A former senior business analyst for Sony Electronics, Josh Enomoto has helped broker major contracts with Fortune Global 500 companies. Over the past several years, he has delivered unique, critical insights for the investment markets, as well as various other industries including legal, construction management, and healthcare.